Elaborating further, the source said, the transaction has been structured in this way to ensure that the rayon business remains within the group's fold.KOLKATA: Kesoram Industries, the diversified flagship company of the BK Birla group, is hiving off its rayon business to an ‘unknown unrelated unlisted’ company, Cygnet Industries for an estimated Rs 480 crore. The move is part of the company's strategy to reorganise and realign its existing businesses and assets including tyre and cement.

When contacted, Kesoram Industries' insiders said, the company's rayon business, which clocked gross revenue of Rs 257 crore in FY 2014-15, will be transferred to Cygnet Industries. Incidentally, Kesoram Industries' rayon business accounts for less than 5 % of its total turnover of Rs 4873 crore as on March 31, 2015. It has a net worth of Rs 109 crore.

Presently, Cygnet Industries is a shell company with a paid up capital of Rs 5 lakh. It is not part of the B K Birla group 'within the meaning of the Companies Act, 2013'. "The Birlas intend to buy the company from an unnamed entity and bring it within the group's fold. Subsequently, we plan to convert Cygnet Industries’ into a wholly owned subsidiary of Kesoram Industries,” the insider added.

Elaborating further, the source said, the transaction has been structured in this way to ensure that the rayon business remains within the group's fold. “Though Kesoram Industries’ has been exploring options to restructure its three business units - cement, tyre and rayon, its monetisation plans did not include disposing off of the business units,” he reiterated.

Post conversion, Cygnet Industries will operate as an independent entity. Going forward, it will secure funds to run its business, earn profits as well as service its loans.

The B K Birla group hopes to consummate the transaction within June 30, 2016, it said in a note sent across to the stock exchanges on Saturday. SBI Capital Markets has 'conducted the business valuation of the rayon undertaking'.